The Kenya Revenue Authority (KRA) has announced the new fringe benefits tax and deemed interest tax rates to serve for the next three months between April and June.
In a notice on Tuesday, April 8, the taxman noted that the market interest rate—the rate at which borrowers can obtain funds from lenders—will be 9 per cent for this period as per Section 12b of the Income Tax Act.
“For the purposes of Section 12B of the Income Tax Act, the Market Interest Rate is 9%. This rate shall be applicable for the three months of April, May and June 2025,” part of the notice read.
The Fringe Benefit Tax is payable by every employer in respect of a loan provided to an employee at an interest rate lower than the market rate.
It also applies to non-cash benefits offered to an employee by an employer, including vehicles, cars, or other forms of perks that are not part of the employee's gross earnings.
Additionally, the Deemed Interest Rate will also be capped at 9 per cent for the next three months.
“For purposes of section 16(2)(ja) of the Income Tax Act, the prescribed rate of interest is 9%. This rate is applicable for the months of April, May, and June 2025,” the statement read.
“Withholding tax at the rate of 15 per cent on the deemed interest shall be deducted and paid to the Commissioner within 5 working days.”
The Deemed Interest Rate is the notional interest that KRA assumes to be payable on interest-free loans provided to a resident person by a non-resident person and primarily targets foreign-controlled entities operating in Kenya.
These new rates are a significant dip from the previous ones from the past three months, where the Deemed Interest Rate was set at 13 per cent in January.
In a notice dated January 17, KRA revealed that it had lowered rates on both the Fringe Benefits Tax and Deemed Interest Rate to 13 per cent from 16 per cent.
The authority also lowered its Low-Interest Benefit from 16 per cent to 14 per cent during this period, which will remain unchanged in the new evaluation.
